The Love Trade for Gold is Still On!

Investors should have gained confidence from Ben Bernanke's recent testimony
to Congress that the Federal Reserve intends on being accommodative as long
as needed. He had a laundry list of job market conditions that needed improving
and reiterated that inflation remains low. It's his belief that "a premature
tightening of monetary policy could lead interest rates to rise temporarily
but would also carry a substantial risk of slowing or ending the economic
recovery and causing inflation to fall further."

The Fed's news is "great for all of us in stocks... and not so great for those
with cash in a savings account, with real negative returns for the past four
years," reminded Money Map Press. Yet, at least in the short term, markets
interpreted Bernanke's testimony differently, as stocks dropped during the
week of May 20.

The news should also be good for gold investors. Not only is the Fed maintaining
its course, the world is also continuing its synchronized easing. According
to Deutsche Bank, central banks representing almost 30 percent of global GDP
are cutting rates.

The rate cuts are spread out over nearly every continent, as you can see on
this great visual posted by Business
Insider. Turkey's central bank cut its benchmark interest rate more than
expected in April by 50 basis points and then another 50 basis points in May.
Serbia also slashed rates by 50 basis points, as did Sri Lanka. Even the European
central bank reduced its main rate to a record low 0.50 percent. According
to Bloomberg, ECB President Mario Draghi is "promising to provide as much
liquidity as eurozone banks need well into next year."

With this global easing cycle, gold and equities had been moving together,
but have been taking vastly diverging paths in the past six months. In fact,
the gold-to-S&P 500 Index ratio has fallen to lows not seen since 2008,
according to UBS Investment Research. This extreme indicates that the precious
metal may be looking more attractive. In addition, "gold's resilience in spite
of very weak investor sentiment is encouraging, with recent price levels having
acted as a good floor so far," says UBS.

As I often remind investors, gold buyers are a diverse group, but generally
fall into one of two categories. Most of the attention gets focused on those
who purchase out of fear of damaging government policies (i.e., the Fear Trade).

The more important demand for gold, in my opinion, comes from the enduring
Love Trade, as countries like China and India buy the precious metal out of
love and tradition.

Looking at a breakdown of gold demand from the World Gold Council (WGC) through
March 31, 2013, the main source of weakness was the Fear Trade, as demand
for gold ETFs and similar gold products plunged in the first quarter. However,
the Love Trade scooped up jewelry and bars and coins, with the tonnage in
each category growing 12 and 10 percent, respectively, on a year-over-year
basis.

You can visually see the strength of the Love Trade below in the year-over-year
change in total consumer demand in tons for gold jewelry, bars and coins.
Indian demand grew the most, increasing 27 percent compared to the previous
year. Demand for jewelry, bars and coins in the greater China area increased
20 percent, as "seasonal strength in China, related to Chinese New Year purchasing,
exceeded all previous peaks, marking a new record quarterly high," says the
WGC. Even U.S. residents had a love for gold, with demand growing 22 percent
over the previous year.

As one example, on the Shanghai Gold Exchange, trading volume surged to a
record 43.3 tons on one day in April, as buyers clamored to buy the metal
at a great price.

Gold purchases are getting so strong these days, buyers are willing to pay
a premium, says Mineweb. The mining publication reported that premiums on
gold bars are climbing to all-time highs in Hong Kong and Singapore, with
Chinese residents paying $5 to $6 an ounce over the spot London price due
to classic economic one-two punch of huge demand and tight supply.

According to data from the Hong Kong Census and Statistics Department, "net
gold flows from Hong Kong to China jumped to 223.519 tons in March from 97.106
tons in February, smashing a previous record of 114.372 tons in December," says
Mineweb.

This is the Love Trade in action.

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Frank Holmes is CEO and chief investment officer of U.S. Global Investors,
Inc., which manages a diversified family of mutual funds and hedge funds specializing
in natural resources, emerging markets and infrastructure.

The company's funds have earned more than two dozen Lipper Fund Awards and
certificates since 2000. The Global Resources Fund (PSPFX) was Lipper's top-performing
global natural resources fund in 2010. In 2009, the World Precious Minerals
Fund (UNWPX) was Lipper's top-performing gold fund, the second time in four
years for that achievement. In addition, both funds received 2007 and 2008
Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a
leading publication for the global resources industry, and he is co-author
of "The Goldwatcher: Demystifying Gold Investing."

He is also an advisor to the International Crisis Group, which works to resolve
global conflict, and the William J. Clinton Foundation on sustainable development
in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator
on financial television. He has been profiled by Fortune, Barron's, The Financial
Times and other publications.

Please consider carefully a fund's investment objectives, risks, charges and
expenses. For this and other important information, obtain a fund prospectus
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